The raging and savage pandemic seemed to have brought in the realisation amongst our policy makers that our perennially neglected and underfunded public healthcare system needed much higher priority and budgetary allocation. Alas, that realisation was short-lived and once the pandemic has waned, our traditional ad-hocism has returned. The total expenditure made by the Centre and the states on health remained consistently below a meagre 1 per cent of GDP throughout; it rose marginally to 1.3 per cent in 2020-21 due partly to the contraction of GDP in that year. In that year, Indian states had spent a total of Rs 42.1 lakh crore, of which only Rs 2.16 lakh crore went to health, while of the total Central expenditure of Rs 34.26 lakh crore, only Rs 38,000 crore went to health, excluding Rs 39,000 crore transferred to the states on centrally sponsored health schemes.

Central expenditure on health in 2021-22 rose to almost Rs 83,000 crore and has remained at that level even in the current fiscal. Health is a state subject under the Constitution and healthcare is financed through taxes. Like education, health has never got the allocation it deserves. Further, any new measures to improve funding also get subverted due to other pressures. One example is the Health Cess payable on income tax. In the 2018-19 budget, a cess of 1 per cent on the income tax was introduced in addition to the existing 3 per cent cess on education to finance rural healthcare for BPL families. The idea behind cesses was to enhance outlays for these crucial sectors that needed enhanced funding, but the government has utilized this cess to finance existing healthcare expenditure rather than expanding it. The share of health in total government expenditure even now remains at the level of 2018- 19 when this cess was introduced, and the cess has largely substituted normal outlays, instead of adding to them.

In the 2017-18 budget, the allocation for health was 2.2 per cent of total expenditure without any cess. In the current budget (FY 2023), allocation of the same 2.2 per cent of total expenditure would have exceeded Rs 88,000 crore, as against the actual allocation of just Rs 83,000 crore including the cess-funded portion. The cess is transferred to the Pradhan Mantri Swasthya Suraksha Nidhi, a reserve fund created in the Public Account of India. If the cess-funded part is excluded, the allocation for health would fall to only Rs 62,451 crore, or only 1.6 per cent of total expenditure, a “shortfall” of Rs 25,700 crore. The cess rather than topping up the health expenditure as intended rather helped the government to cut down budgetary support, just like in the case of education. No wonder that in terms of quality and accessibility of healthcare, we rank below our neighbours, China, Bangladesh, Sri Lanka and Bhutan. An Oxfam survey in 2020 found that India’s healthcare budget was the fourth lowest in the world.

The allocation for public healthcare becomes important when we consider the fact that most Indians shun the public health services due to their decaying state. As per the latest NSS survey on health (75th round, 2017-18), about 66 per cent of India’s population receive treatment from private hospitals or clinics – only 33 per cent of the rural population and 26 per cent of the urban population avail treatment from public hospitals. This means the poor depend on private healthcare more than the rich, and risk being pushed deeper into poverty as the private healthcare sector is almost completely unregulated and often charges usurious prices. The survey found that the average medical expenditure per hospitalisation case was seven times costlier than in public hospitals, yet most poor people preferred private hospitals due to the dysfunctional state of public hospitals plagued with long queues, absence of specialists and medicines, non-functional equipment, etc.

More than 85 per cent Indians did not have any health insurance cover till 2018 – Government health schemes covered just 13 per cent of rural and 9 per cent of urban population. It was to address this colossal gap that the Union Government had launched the Pradhan Mantri Jan Aarogya Yojana (PMJAY) as part of its flagship Ayushman Bharat initiative to extend an annual insurance cover of Rs 5 lakh per family to 10 crore households, or roughly 50 crore people. Till November 2021, 2.4 crore hospitalizations costing more than Rs. 28,300 crore have been authorized under PMJAY. This is a huge expenditure spent on treatment, which did not create any additional public health infrastructure. The infrastructure part is to be addressed by Ayushman Bharat Health Infrastructure Mission, budget allocation for which in 2022-23 is Rs 5,155 crore, while that for PMJAY is Rs 6,412 crore. No doubt, the Ayushman Bharat policy intervention is a boon for the poor families but comes at a high cost and addresses only one part of the malaise, leaving the other part, regulation of private healthcare, completely unaddressed.

Indeed, the landscape of our public health sector closely mirrors our public education sector, both of which are littered with vast arrays of dysfunctional institutions scattered with few islands of excellence. In the health sector we have the AIIMS, ICMR, PGIMR, etc. side by side with state hospitals which lack resources, capacity, and administration – and also imagination – to address the healthcare needs of people. Both sectors represent stark failures of our public policies since independence. The gap has been filled by the private sector which exacts its cost and makes the poor poorer. Under the colonial empire, India had only 21.25 lakh beds, less than one per thousand people, one doctor for 6,300 people and one nurse for 43,000 people. In 1946, a Government-appointed Committee led by Sir Joseph Bhore submitted a comprehensive report that constituted the first template of our health policy and shaped our approach to health even after independence.

Recognising the underlying poverty and malnutrition, the report delinked healthcare from the ability to pay: “No individual should fail to secure adequate medical care because of an inability to pay for it.” The Report figured widely in the Constituent assembly debates on allocation of functions between the Centre and the states and in the implicit recognition in our Constitution that right to health is integral to the right to life. Healthcare was addressed initially through the five-year plans, and a health policy was adopted only in 1983, which aspired to cover all aspects of health while emphasising upon the establishment of a comprehensive primary health care system reaching out to the remotest areas, and the setting up of a highly dispersed network of primary health care services linked with extension and health education. In a significant shift from this policy and diluting the role of the state, in 1993, the government resolved to limit the scope of public expenditure only for preventive healthcare and epidemic control, while leaving the role of curative healthcare to the private sector.

While the shift was welcome, it was necessary to create a regulatory architecture to prevent exploitation and abnormal profiteering by private providers which was not done and is absent even now. The private sector was given liberal tax concessions and allotment of land at nominal costs to set up hospitals against the stipulation of free treatment for the poor. But when the hospitals came up by availing all these concessions and continued to deny access to the poor at affordable rates, governments found themselves powerless to bring them to book. This was partly due to legal and administrative weaknesses, but mostly due to the governments’ dependence on private healthcare in the absence of their own capacities. Driven by surging demand, private healthcare ballooned; by 2002, over two-thirds of all hospitals and facilities belonged to the private sector which was running 11,345 out of total 15,393 hospitals in India, with 2.63 lakh beds. Of the total 22,292 allopathic dispensaries, governments ran only 9,856.

The 2001 census reported a total population of 102 crore, with 71 crore living in rural areas. But our three-tier rural health infrastructure of sub-centres, primary health centres and Community Health Centres (CHCs) could collectively ensure only 57,000 beds for 71 crore rural people, or only one bed for 12,000 people. As Shankar Aiyer noted in his book The Gated Republic, it was a deja-vu moment that recalled the Bhore Committee observations about rural health status in India before independence. It is almost as if the state has abdicated these responsibilities and left it to the private sector which has flourished.

The private hospital market is estimated to be worth Rs 5 lakh crore ~ India has an estimated 50,000 private hospitals and nursing homes, and 4.2 lakh beds. Private sector accounts for 75 per cent of all hospitals and 40 per cent of our total bed capacity. KPMG estimates that the private healthcare sector accounts for 82 per cent of the net value of the healthcare market. In contrast, in 2017, there were 21,403 government hospitals with 2.65 lakh beds for nearly 900 million rural population, making it one bed for 3,300 persons. In fact, there was no alternative but to fall back on the private sector for extending healthcare to people.